Tagged: startups

This past Friday was Career Day at Ankeny Centennial High School (the high school near me). They invited me to talk about what I do in my career. I gave them several options (software engineer, consulting, entrepreneurship/startups). I was asked to speak on entrepreneurship.

Rather than just talk about me, I thought it’d be more fun (for me, but especially them) to show them how to create their own successful startup businesses.

In one of the three sessions I told the students that I was considering setting up some kind of extra-curricular “create your own startup” class, where I would mentor high-school-level students and help them create a business over the course of a semester. There seemed to be a lot of interest in it, so we’ll see where that goes.

I was recently asked about my thoughts on NestMint. Specifically: “Do you think it’s valuable to the community? Why? What impact do you foresee this investment fund having on the overall economic health of our startups in Iowa?”

I’m no expert on the subject, but here are my thoughts:

I definitely think there’s value to the community in NestMint. To me it feels like the money portion of a startup accelerator.

Prior to business validation, most entrepreneurs use their own money and possibly money from friends and family to start building their company.

Before NestMint, the standard advice to startups (in Iowa) thinking about raising money was to “build it first and prove the business (via traction, etc.) and only then seek angel investment”. That’s still good advice (and that’s what I’m doing with Locusic), but doing it that way usually means building the startup part-time. That’s because you still need to keep your day job to earn a living – unless you’re fortunate enough to have three to six months worth of living expenses in the bank. So, because you’re only working on the startup part-time, things take a bit longer. And because you still have a day job there’s less of a sense of urgency to make your startup succeed, so things take a bit longer still.

NestMint gives another option for early stage startups in Iowa – especially for younger entrepreneurs whose expenses are lower. Seed, or idea-stage, financing from NestMint could allow a startup’s founder(s) to focus 100% of their energy and time into building their new company. And when you’re able to go “all-in” there are many psychological effects in play that pressure you to succeed (or not fail).

Possible negatives:

The requirements to apply seem a bit onerous to me – specifically the business plan and financial plan. It’s a bit ridiculous to require a “plan” for a startup at the idea stage, since you really don’t know what you’re building yet. Your plan will most likely be flawed, so if you precisely follow it you will most likely fail. Startups at this stage need the flexibility to pivot to different business models as they learn new information about their customers, market, etc. If I didn’t know better, I’d think that the NestMint fund might be a bit out of touch with the dynamic nature of startups. But knowing that Mike Colwell and Tej Dhawan (two key supporters of the Iowa startup ecosystem) are involved with NestMint, I bet I just don’t understand enough of the details about these requirements, or what they mean by “plan”. The site alludes to a plan “template”, but it hasn’t been posted yet.

Contrasting with an accelerator:

A startup accelerator, like Y Combinator, Techstars, Gener8tor, or the new Iowa Startup Accelerator, provides similar amounts of financing for startups. Y Combinator hopes to get one “home run” out of the 50 or so startups they accept for each “class”. Y Combinator accepts only the best of the best of early stage startups from around the world, they provide world class mentoring, and their startups are immersed in a culture of other startups all working very, very hard to achieve success.

NestMint will only be accepting applicants from Iowa. They may accept applicants from early-stage companies other than high growth potential startups. It’s unclear (to me) what kind of mentoring or other scaffolding will be in place, if any, to help their companies succeed. I hope the NestMint investors are realistic and the fund won’t be called a failure if it doesn’t get the same rate of return as a world-class accelerator.

To me it seems a bit easier to apply to an accelerator than for financing from NestMint. Although, it might be easier to actually receive financing from NestMint than be accepted to an accelerator.

Accelerators usually require the startup to relocate to near the accelerator’s location, at least temporarily. With pure financing from NestMint, an Iowa startup could stay where they are – around the resources, talent, and potential customers they already know.

I’m interested in or curious about:

what kind of additional mentoring, if any, that NestMint financing recipients will receive from the people backing the fund.

which kinds of businesses, besides high growth potential startups, will receive funding.

what additional burden does taking this funding put on the entrepreneurs (e.g. paperwork, reporting to the partners, a board seat?).

for the more successful startups that receive NestMint funding, will the people (managers, investors) behind NestMint help those startups secure additional (A round) financing?

If the fund continues to invest in startups over the next several years (and they evolve and work out the kinks during that time), I think it could be a key contributor to the success of the Iowa startup community.